Pitney Bowes Inc.

Good morning and welcome to the Pitney Bowes fourth quarter 2021 and full year earnings conference call. Your lines have been placed in a listen-only mode during the conference call until the question and answer segment. Today's call is also being recorded. If you have any objections, please disconnect your lines at this time. I would now like to introduce participants on today's conference call. Mr. Mark Lautenbach, President and Chief Executive Officer, Ms. Anna Maria Chadwick, Executive Vice President and Chief Financial Officer, and Mr. Ned Zachar, Vice President, Investor Relations. Mr. Zachar will now begin the call with a safe harbor overview.

Good morning, everybody. This is Ned Zachar. I manage the Investor Relations program for Pitney Bowes, and I'd like to welcome everyone to the call this morning. We very much appreciate your participation. Part of my duties includes covering the usual and customary safe harbor information, for these calls, so please bear with me for just a few minutes. Included in today's presentation are forward-looking statements about our expected future business and financial performance. Forward-looking statements involve risks and uncertainties that could cause actual results to be materially different from our projections. For more information about these risks and uncertainties, please see our earnings press release, our 2020 Form 10-K Annual Report, and other reports filed with the SEC that are located on our website at www.pb.com and by clicking on investor relations. Please keep in mind that we do not undertake any obligation to update any forward-looking statements as a result of new information or developments. Also, for non-GAAP measures that are used in this press release or discussed in this presentation, you can find reconciliations to the appropriate GAAP measures in the tables attached to our press release and also on our investor relations website. Additionally, we provided a slide presentation on our investor relations website that summarized many of the points we will discuss during today's call. Our format today is going to be familiar. Mark Lautenbach, our President and Chief Executive Officer, will begin with opening remarks, which will be followed by Anna Chadwick, our Chief Financial Officer, who will provide a deeper discussion of our financial results. I'd now like to turn the presentation over to Mark. Mark, the floor is yours.

Thanks, Ned, and good morning, everyone. Thank you for joining us this morning. Others have said it, but you can't say it enough. Thank you to not just the PB team, but to our industry colleagues and all other essential employees who did yeomaned work during the holiday season. There's no doubt that the collective work of so many people in our country and our economy in a much better place than otherwise would have been the case. As our custom has been, I will provide a perspective on the year and Anna will discuss the quarter in detail. I will also provide my take on the quarter in a minute, but suffice it to say that there are many different cross-currents running through the period. Pre-sort performed exceptionally well. Suntec successfully negotiated their way through some difficult supply chain issues and Turner Nassau Porter. GC had a very successful peak season in terms of providing good service to our customers, but right-year changes in consumer buying behavior created a different financial result than we expected. I'll come back to this topic in a moment, so let me elaborate on the annual results first. I have said for a while that the final chapter of a successful transformation is profitable revenue growth. and in 2021, we grew revenue and earnings per share. For sure, not everything was perfect and we are far from done, but 2021 was another important step forward. SunTech and PreSort had very good years and in aggregate, the two businesses grew revenue and profit per year. I think it's worth noting that the conventional wisdom for PD has been that GEC's revenue and profit improvement outrun the declines in our traditional businesses, which many have characterized as melting icebergs. In 2021, that paradigm changed, and new initiatives in pre-sort and fintech have put those businesses on a different trajectory. Now, all of our businesses have a clear line of sight to revenue growth and profit growth. This wasn't imaginable a few short years ago. For GEC 2021 was a year of building capabilities and capacity. We invested in new facilities, new automation, transportation, and most importantly, we invested in our people. We believe the e-commerce shipping market continues to have very attractive long-wind tailwinds, albeit with some hard-to-predict short-term dynamics. Our capabilities and value propositions continue to resonate in the market. After record revenue growth of 41% in 2020, we grew on top of that in 2021, and we continued to win new customers, adding 198 new logos with 387 new signings during 2021. Importantly, our customer satisfaction continued to improve in 2021, which is a vital indicator of future success. For our profit performance, after three quarters of strong improvement, The fourth quarter clearly turned out different than we thought due to what has been a well-reported change in consumer buying behavior as the pandemic and supply chain issues continue to linger for the retail sector, including our clients. This is a good segue to the fourth quarter. First, the easy part. As I said at the beginning of my remarks, Presort had an absolutely outstanding quarter and Zantec had a very good quarter. Most of these businesses are on an excellent trajectory. In GEC, our principal motivation for the fourth quarter was to deliver a successful holiday peak season for our clients, and we did that. Our service levels improved dramatically from 2020, and we ensured our clients' shipments made it to the consumers in time for the holidays. Given the circumstances, that is the supply chain challenges across the globe, a lot of our status as a relative newcomer to this market Great services vital for PB. That being said, the financial performance of business was not what we expected and was disappointing. So what happened? You can overcomplicate the fourth quarter dynamics, but the gist of it is we planned and expected a certain volume of parcels. The forecast was interlocked and reinterlocked with our clients. We built our capacity plan against the volume we anticipated In fact, we probably overbuilt our capacity of touch against the planned volume because we were determined to deliver successfully for our clients. And simply said, we never got the volume we expected. It's been well reported that consumers responded to the blend of supply chain issues, plus COVID, plus the holiday, with new ways to buy that provided certainty of delivery. We see this with accelerated purchases, more traffic in stores, and were online and moved towards gift cards and in-store pickup. To a degree, we saw this in some of our market research in the quarter, but our strong bias was towards ensuring we had appropriate capacity available for our customers. So we did not dial down labor and transportation until late in the quarter. Once we decided to dial down transportation and labor, we did it quickly, though it was too late to change the outcome for the quarter. clearly created a disappointing financial result, but from our perspective, the unexpected change in consumer buying behavior was an aberration caused by the intersection of the pandemic, ongoing global supply chain issues, and the holiday season. To be clear, we do not believe that this year's aberration is indicative of longer-term e-commerce trends. That said, we have taken a series of actions to ensure that we insulate ourselves against this outcome in the future. The gist of the changes include more agility and analytics in our client forecasting process. It's worth noting that we were able to take a chunk of the variable cost out of the business in just a couple of weeks. As I said, I remain very confident in the e-commerce logistics market opportunity, our business model, and mostly the capabilities we are building, particularly the team. Let me sum it up. While the year is different in some ways than I thought it would be, I would characterize the year as successful. began the year with a very successful debt refinancing, built substantial capabilities in our GEC business, improved our client-sized faction, generated significant cash flow, and reduced debt. And our team, notwithstanding the challenges of COVID, continues to be highly engaged. And that result was an increase in revenue and EPS for 2021. More to do, but we continue to move strongly that we're on the right path across our entire portfolio. Thank you for your time and your attention, and now let me turn it over to Adam.